The Association of Chartered Certified Accountants (ACCA) has pressed HM Revenue and Customs (HMRC) to justify its request for additional enforcement powers targeting taxpayers and advisers engaged in fraudulent or dishonest conduct.
The intervention forms part of the ACCA’s response to a UK tax authority consultation.
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HMRC is considering introducing a new criminal offence covering “reckless untrue statement or declarations in direct tax”.
The ACCA acknowledged the government’s aim of reinforcing the integrity of the UK’s tax system.
However, it maintained that HMRC must first clarify why the current regulatory structure is insufficient.
The existing framework already includes civil penalties for inaccuracies and failures to notify. It also covers criminal offences for fraud and dishonest behaviour.
The ACCA suggested that this should be adequate to tackle the small proportion of taxpayers whose conduct the government is seeking to address.
The organisation reiterated this point, again asking HMRC to demonstrate why current mechanisms fall short when dealing with such a limited scope of problematic behaviour.
The ACCA did concede that targeted sanctions aimed at serious misconduct could, in principle, improve consistency, proportionality and deterrence across the tax system.
However, it cautioned that any new offence would require careful drafting and implementation.
Honest taxpayers and their advisers, the ACCA argued, must be protected from unintended consequences.
Criminal liability, it said, ought to be reserved strictly for cases involving conscious disregard of risk or deliberate dishonesty.
ACCA Technical and Strategic Engagement head Glenn Collins said: “A reassessment of all existing powers is overdue.
“Piecemeal additions and changes without an evaluation of the current powers HMRC have resulted in issues for HMRC, taxpayers and agents.”
According to the ACCA, criminal liability should only apply when an individual knowingly disregards an obvious and unjustifiable risk that a statement is false.
It should not apply to taxpayers or advisers who have reached a “reasonable interpretation of uncertain legislation”, or who have made a genuine error despite taking all reasonable care.
The ACCA warned against designing a regulatory system disproportionately shaped by the actions of a small number of bad actors.
Instead, it recommended that enforcement efforts be directed specifically and precisely at those who deliberately abuse the tax system.
